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The yuan weakened beyond a psychologically key level of 6.6 for a dollar for the first time in six months on Wednesday, and although it recovered some of the losses to mid-day, the bets are more and more depressed.
Reflecting rising risks for the economic outlook, the People's Bank of China lowered its mid-point yuan for the sixth consecutive trading day to 6.5569 per dollar, 389 pips or 0.6% lower than the previous correction of 6 , 5180.
This is the lowest correction since December 25 and the largest percentage decline since January 9, 2017, with some analysts suspecting that the PBOC would rather let the currency depreciate moderately.
"The PBOC's preference could be to allow a moderate weakening, to retreat if the pressures on depreciation begin to intensify, but it's a difficult balance to reach and the risks of a Significant depreciation has increased, "say economists at Capital Economics.
The yuan exchange rate fell 6.6 percent on the dollar at the start of the session, after opening at 6.5717 and then reaching a low of 6.6159 at one time, the lowest since December 19, 2017 .
By mid-day, the onshore spot was changing hands at 6.5977, 180 pips less than the previous end-of-season close and 0.62 percent below the mid-point.
Its offshore counterpart was on track for its tenth consecutive day of losses, 0.04% lower than the onshore spot at 6.6004 per dollar.
Dollar sales were observed to help the onshore spot yuan return to a higher level than the rate of 6.6 per dollar by midday, several traders said.
However, it was not clear whether state-owned banks were supporting the yuan, they said.
The large state-owned Chinese banks have been repeatedly seen selling dollars to support the yuan after a 2015 devaluation that shook the global markets. These dollar sales interventions dried up last year.
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